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In Hackler v. State Farm Mut. Auto. Ins. Co., No. 3:14-cv-00531-MMD-VPC, 2016 WL 5402743 (D. Nev. September 26, 2016), the policyholder's underinsured motorist (UIM) claim was at issue. The insurance carrier took a long time to decide whether it would, or would not, pay the claim. The insurance carrier argued that its failure to deny the UIM claim was actually a defense to a bad faith claim. Undisputed evidence of this delay prevented the entry of summary judgment in the carrier's favor on the policyholder's claim for bad faith, however:
State Farm argues at length that Hackler cannot show bad faith because she cannot show a decision to deny benefits. (See ECF No. 55 at 4-5.) However, as courts in this district and elsewhere have recognized, sitting on a claim for an extended period is functionally equivalent to a denial. (Citations omitted.) As such, the Court finds State Farm's understanding of the requirements of showing bad faith needlessly narrow.
Hackler v. State Farm Mut. Auto. Ins. Co., No. 3:14-cv-00531-MMD-VPC, 2016 WL 5402743, at *4 (D. Nev. September 26, 2016).
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In Kentucky, you can't see the forest of bad faith under the Kentucky Unfair Claim Settlement Practices Act unless there is bad-faith conduct exposed to punitive damages, i.e., conduct equivalent to manslaughter in most States.
The Kentucky Supreme Court has just held that a bad faith claim against an insurer is, essentially, based on conduct that draws an assessment of punitive damages:
A bad faith claim under Kentucky law is, essentially, a punitive action. The tort of bad faith is non-existent under our law, unless the underlying conduct is sufficient to warrant punitive damages. Absent evidence of punitive conduct, an insurer is entitled to a directed verdict for any bad-faith claim levied against it. This explains why KUCSPA [Rev. Stat. Ann. § 304.12-230] requires plaintiffs to prove that an insurer’s actions during resolution of the claim were outrageous, or because of the defendant’s reckless indifference to the rights of others.
Hollaway v. Direct Gen. Ins. Co. of Miss., Inc., No. 2014-SC-000758-DG, 2016 WL 5245694, at *5 (September 22, 2016) (STATED "THIS OPINION IS NOT FINAL AND SHALL NOT BE CITED AS AUTHORITY IN ANY COURTS OF THE COMMONWEALTH OF KENTUCKY.").
Wells Fargo consented to other things as well, including reserving or depositing into a special deposit account "an amount not less than $5 million," within "10 days of the Effective Date," for the purpose of securing its promise to provide "redress to Affected Consumers." (Id., paragraph 49 on page 14.)
These developments are being reported on the day that this article is written. The developments are so new and so related to bad faith that I could not help but make this information and these documents available to my readers. As is often the case, however, there are unanswered questions arising from these developments.
First, there are four (4) areas of apparent misconduct referenced in Wells Fargo's Consent Order with the CFPB, but the press only mentions the first two at this time:
Unauthorized Deposit Accounts;
Unauthorized Credit Cards;
Unauthorized Enrollment into Online-Banking Services; and
Unauthorized Debit Cards.
So, the first question is, why?
The answer to the first question may be related to some or all of the remaining questions. The CFPB's Consent Order relied on "an analysis" that Wells Fargo "performed" to "assess" improper sales practices by its employees, which it may or may not have induced, between May, 2011 and July, 2015. (Id., paragraph 15 on page 5.) What "analysis?" No documents resembling an analysis were made available by Wells or by the CFPB, and it even appears that the CFPB did not request any documents.
Whatever the Wells "analysis" may be, Wells attached numbers to two things in the Consent Order as a result.
First, the "Unauthorized Deposit Accounts" were opened by Wells Fargo employees, according to Wells Fargo itself, 1,534,280 times during the period. Further, "roughly 85,000 of those accounts incurred about $2 million in fees, which [Wells Fargo] is in the process of refunding," it said. (Id., paragraph 16 on page 5.)
Second, Wells Fargo concluded that its employees applied for "Unauthorized Credit Cards" in the names of Wells Fargo customers another 565,443 times during the same period of May, 2011 through July, 2015. Wells further "determined that roughly 14,000 of those accounts incurred $403,145 in fees, which [Wells Fargo] is in the process of refunding." (Id., paragraph 23 on page 7.)
Perhaps these two areas of apparent misconduct were the only ones mentioned in press reports because they are the only ones provided with numbers in the CFPB Consent Order.
In any event, how did the CFPB come to publish the numbers provided by a Respondent as part of the CFPB's own "Findings and Conclusions" in this Consent Order? If the CFPB performed its own investigation -- and there is no indication that it did -- then the CFPB certainly remained quiet about it.
So, what we end up with are quite a few questions about exactly what went on in this "bad faith" matter. And answers provided only by the accused party, it seems.
This may be the moral equivalent of a stipulated final judgment of bad faith in which the company was willing to stipulate that it did nothing wrong and, such as in this case, the company is paying for the misdeeds of more than 5,300 bad apples or "rogue employees."
In the case of G&S Metal Consultants, Inc. v. Continental Cas. Co., No. 3:09-CV-493 JD, 2016 WL 4095608, at *13 (N.D. Ind. August 2, 2016), the District Court did not use the words but effectively and totally rejected the policyholder's "bad faith" claim under Indiana law because Indiana law does not recognize either a "continuing bad faith" theory or a theory of "bad faith" based on litigation conduct, theories which are available in other jurisdictions:
Conduct that occurs after the filing of a bad faith claim, or in the case of a claim denial after the insurer's denial of the claim, is irrelevant to evaluating a bad faith claim. (Citation omitted.) Here, regardless of whether GSMC describes Continental's position as a “claim denial” or otherwise, years have passed since Continental rejected GSMC's business interruption coverage demands and GSMC filed its bad faith claim.
While these bad-faith theories got relatively short shrift under settled Indiana law, this case also presented coverage issues involving appraisal, fraud, and business interruption coverage including the period of restoration and issues concerning new customers. The District Court granted the insurance carrier's motion for summary judgment in part on the policyholder's bad faith claim, and denied the policyholder's motion for summary judgment "on the BIEE ["business income and extra expense coverage"] Form." G&S Metal Consultants, Inc. v. Continental Cas. Co., No. 3:09-CV-493 JD, 2016 WL 4095608, at *13 (N.D. Ind. August 2, 2016).
The Federal Judge in New York had a tough job in the case of Purifoy v. Walter Investment Mgt. Corp., No. 13-cv-937 (RJS), 2015 WL 9450621 (S.D.N.Y. December 21, 2015). He was faced in particular with two hard questions about the plaintiffs' breach of contract claims, and he had to apply Florida law to answer them.
Both questions arose as a result of Green Tree Servicing's motion to dismiss. The first question was whether Green Tree's mortgage servicing was "reasonable and appropriate" under the mortgage when Green Tree charged the plaintiffs for backdated insurance.
Now, here is what the plaintiffs alleged when they claimed that Green Tree was not authorized to force them to pay premiums for backdated insurance. The plaintiffs argued that the mortgage loan servicer did not have this power because of the nature of insurance.
In other words, even if the plaintiffs breached the mortgage by not keeping collateral protection insurance in effect at all times, still the servicer could not force-place backdated insurance because there is no such thing as "insurance" which is "backdated":
Plaintiffs' assertion that there was “no risk of loss” during the lapse in coverage (FAC ¶ 31) and, therefore, no need to backdate the force-placed insurance because “the purpose of insurance is to protect against future risks” (Opp'n at 9), misconstrues the nature of hazard insurance and the risks that accompany lapses in insurance coverage.
Purifoy v. Walter Investment Mgt. Corp., No. 13-cv-937 (RJS), 2015 WL 9450621, at *7 (S.D.N.Y. December 21, 2015) (emphasis added).
We may never know what the Federal Judge in New York meant by this, because he did not explain how or why anybody but him misconstrued the nature of insurance. He turned instead to cases decided under Illinois, Minnesota, and New York law on an issue common to all of those cases as well as to this case: The issue of whether it is plausible for a plaintiff to allege that no loss occurred during the period when the collateral protection insurance purchased by the plaintiffs lapsed.
That was not the issue the judge said he was addressing. The issue which he did address has nothing to do with the purpose of insurance which is to protect against future risks, and the cases he cited have nothing to say about the purpose of insurance.
At any rate, the judge in this case ruled that under Florida law, Green Tree Servicing acted reasonably and appropriately in charging the plaintiffs-homeowners for backdated insurance. Unfortunately, that ruling is missing any support from Florida case law, or otherwise.
The second issue on the plaintiffs' alleged claim for breach of contract concerned their allegations that Green Tree breached the mortgage by taking back "commissions" through its insurance subsidiary, and including them in the force-placed insurance premiums that Green Tree charged the homeowners. The "commissions" were allegedly payments that Green Tree took back from the insurance carrier after it placed the policy through that carrier.
Finding several cases decided in Florida in addition to citing cases decided in California and distinguishing a case decided in Minnesota offered by Green Tree, the New York Federal Judge denied Green Tree's motion to dismiss the plaintiffs' breach of contract claim with respect to Green Tree's taking "commissions" for the insurance it force-placed on the plaintiffs. Purifoy v. Walter Investment Mgt. Corp., No. 13-cv-937 (RJS), 2015 WL 9450621, at *7-*8 (S.D.N.Y. December 21, 2015).
MAY BE GREAT PEOPLE BUT NOT BE EXPERTS ABLE TO TESTIFY IN COURT ON THE SUBJECT OF THE LITIGATION.
Attorneys are often selected by all sides to give Expert Testimony. However, if the proffered Expert does not know the subject matter, that witness is not an Expert in that particular case.
This is a problem in all areas including but not limited to insurance bad faith. For example, this problem surfaced in a Wisconsin case recently reported by Westlaw: Village of Slinger v. Polk Prop's, LLC, 2016 WL 4533623 (Wis. Ct. App. August 31, 2016) (NOTICE: FINAL PUBLICATION DECISION PENDING).
The plaintiffs in that case sued for legal malpractice. One of the plaintiffs selected an apparently prominent attorney "as its expert witness on [the defendant's] legal malpractice." The problem as the Wisconsin Court of Appeals saw it, however, is that the issue involved in the case is "drafting developer's agreements." The appellate court clearly stated that the attorney proffered as an expert had "a brilliant resume." The court went on to add, however, that the attorney-proffered-as-an-expert "has little foundation in the specialized area of drafting developer's agreements and what foundation he does have is neither recent nor extensive. The circuit court did not err in its discretionary decision to exclude [the attorney's] testimony based on [the attorney's] insufficient qualifications." Village of Slinger v. Polk Prop's, LLC, 2016 WL 4533623 ¶ 13 (Wis. Ct. App. August 31, 2016).
"Foundation in the specialized area" upon which the attorney was offered as an Expert. Qualifications in that area are the ones that count. Future articles posted here will explore the most significant recent decisions in insurance bad faith cases turning on the same points.
INTERESTED IN READING A FREE COPY OF THE ONLY BOOK WRITTEN ABOUT LENDER FORCE-PLACED INSURANCE PRACTICES?
This is the second special article of its kind since last Thursday, September 1, 2016. This article repeats my offer for a free copy of my book, Lender Force-Placed Insurance Practices published by the American Bar Association. I am reminding readers of my offer simultaneously on Insurance Claims and Issues Blog and on Insurance Bad Faith Claims Law Blog.
Before I get to the particulars, one thing must be clearly understood or nothing wonderful can come of our story, to paraphrase Dickens. I do not expect and I have no desire to be retained in any capacity to represent as counsel or to provide expert witness services to any party in any case in which I have not already been retained before making this offer.
Here is how to get a free copy of "Lender Force-Placed Insurance Practices": If you are or were a party or an attorney of record in a lender force-placed insurance ("LFPI") case in a Federal Court case anywhere in the United States, send me the name of your case, the case number, and the Court in which the case is located, so that I can look your case up on PACER and verify that you are or were a party or a counsel of record in one of the LFPI cases. LFPI cases are eligible so long as they have been closed within the past five (5) years or are pending right now, in any United States District Court or United States Circuit Court of Appeals.
If you are or were a party or if your law firm is counsel of record in one of these LFPI cases, be one of the first 3 people to respond to this offer with your mailing address and I will send you or your firm a free copy of Lender Force-Placed Insurance Practices (American Bar Association 2016). (Limit: One free Book per person or per law firm.)
The timeframe to respond to this offer is between September 1, 2016 and September 15, 2016. This offer ends as of September 15, 2016. On that date, I will determine who the first 3 responders are and mail them each their free Books.
After a judicial ruling in which Georgia joined the majority of jurisdictions holding that "bad-faith-in-settlement" can result from a liability insurance carrier's failure to accept a time-limit settlement demand within the limited time of the demand, the Georgia Legislature acted. The Legislature amended the Georgia settlement-offer statute apparently to provide additional time to liability carriers to decide whether to accept settlement offers (or what the carriers themselves ordinarily call settlement demands), which again has counterparts in many States and other jurisdictions.
The interplay of "bad faith" ramifications and statutory interpretations came together in Grange Mut. Cas. Co. v. Woodard, 826 F.3d 1289 (11th Cir. 2016). With a wrinkle. That case did not present just questions of offer and acceptance. The claimants in that case added a condition that they receive payment within 10 days. Clearly the carrier in that case did not meet thatcondition within 10 days.
In that case, the Eleventh Circuit Court of Appeals certified the following questions to the Georgia Supreme Court, requesting the State Supreme Court's answers as to what Georgia State law will reply to them:
(1) UNDER GEORGIA LAW AND THE FACTS OF THIS CASE, DID THE PARTIES ENTER A BINDING SETTLEMENT AGREEMENT WHEN THE INSURER GRANGE ACCEPTED THE WOODARDS' OFFER IN WRITING?
(2) UNDER GEORGIA LAW, DOES O.C.G.A. § 9-11-67.1 PERMIT UNILATERAL CONTRACTS WHEREBY OFFERORS MAY DEMAND ACCEPTANCE IN THE FORM OF PERFORMANCE BEFORE THERE IS A BINDING, ENFORCEABLE SETTLEMENT CONTRACT?
(3) UNDER GEORGIA LAW AND THE FACTS OF THIS CASE, DID O.C.G.A. § 9-11-67.1 PERMIT THE WOODARDS TO DEMAND TIMELY PAYMENT AS A CONDITION OF ACCEPTING THEIR OFFER?
(4) UNDER GEORGIA LAW AND THE FACTS OF THIS CASE, IF THERE WAS A BINDING SETTLEMENT AGREEMENT, DID THE INSURER GRANGE BREACH THAT AGREEMENT AS TO PAYMENT, AND WHAT IS THE REMEDY UNDER GEORGIA LAW?
These important questions are self-explanatory, especially given their historical context.
The answers? Maybe not so much. The answers provided by the Georgia Supreme Court to these questions may guide more than judges, lawyers, and parties pursuing claims and defenses under Georgia law. The Supreme Court's answers may extend beyond Georgia to the nation.
INTERESTED IN READING A FREE COPY OF THE ONLY BOOK WRITTEN ABOUT LENDER FORCE-PLACED INSURANCE PRACTICES?
This is a special article for a couple of reasons. For one, it is being posted both on Insurance Claims and Issues Blog and on Insurance Bad Faith Claims Law Blog, and it will also be posted on Facebook.
Another reason that this is a special article is because it is addressed to a specialized audience. I am offering a free copy of my Book, Lender Force-Placed Insurance Practices published by the American Bar Association in 2015, to the following people only.
Before I get to the particulars of this offer, one thing must be clearly understood or nothing wonderful can come of our story, to paraphrase Dickens. I do not expect and I have no desire to be retained in any capacity to represent as counsel or to provide expert witness services to any party in any case in which I have not already been retained before making this offer.
If you are an attorney of record in a lender force-placed insurance ("LFPI") case in a Federal Court case anywhere in the United States, and if you are interested in reading a free copy of the only book ever written about LFPI practices, send me the name of your case, the case number, and the Court in which the case is located, so that I can look your case up on PACER and confirm that you and your law firm are counsel of record for one of the parties. LFPI cases are eligible so long as they have been closed within the past five (5) years or are pending right now, in any United States District Court or United States Circuit Court of Appeals.
If your firm is counsel of record for any party in one of these LFPI cases and if you are one of the first 3 lawyers to respond to this offer with your firm's mailing address, I will send your firm a free copy of Lender Force-Placed Insurance Practices (American Bar Association 2015). (Limit: One free Book per law firm.)
The timeframe to respond to this offer is between September 1, 2016 and September 15, 2016. This offer ends as of September 15, 2016. On that date, I will determine who the first 3 responders are and mail them each their free Books.
To respond to this offer, send us an EMail either from the Contact page of www.lenderforceplacedinsurance.com or from the Contact page of www.dennisjwall.com with all the information we have laid out here for you to put in your Reply if you would like to accept this offer.
